the import-export clause - yale university

HeinOnline -- 68 Miss. L.J. 521 1998-1999

THE IMPORT-EXPORT CLAUSE

Boris 1. Bittker·

Brannon P. Denning··

1. INTRODUCTION

A companion piece to the Commerce Clause of the Consti-tution is the less well-known Import-Export Clause:

No State shall, without the Consent of the Congress, lay anyImposts or Duties on Imports or Exports, except what may beabsolutely necessary for executing its inspection Laws; andthe net Produce of all Duties and Imposts, laid by any Stateon Imports or Exports, shall be for the Use of the Treasury ofthe United States; and all such Laws shall be subject to theRevision and Controul of the Congress. l

The Import-Export Clause was the principal remedy proposed by the Philadelphia Convention to remedy the commercial strife that characterized the relations among the statesunder the Articles of Confederation, as noted by the SupremeCourt in 1976:

• Sterling Professor of Law Emeritus, Yale University.•• LL.M. Candidate, Yale Law School. Research Associate and Senior Fellow,

Yale Law School 1997-98.This article is adapted from material to be published in a forthcoming trea

tise entitled Bittker on The Regulation of Interstate and Foreign Commerce.1 U.S. CaNST., art. I, § 10, d. 2. See generally Elliot D. Hinds, Student Pa

per, State Taxes and the Import-Export Clause, 14 AM. J. TAX POL'y 73 (1997);Andrew Lizotte, Comment, Taxation-State Excise Taxes on Goods to Be ExportedHeld Unconstitutional, 15 SUFFOLK TRANSNAT'L L.J. 430 (1991). See also Albert S.Abel, The Commerce Clause in the Constitutional Convention and in ContemporaryComment, 25 MINN. L. REv. 432 (1941); Steve Charnovitz, The North AmericanFree Trade Agreement: Green Law or Green Spin?, 26 LAw & POL'y INT'L. BuS. 1,6-14 (1994); Walter Hellerstein, State Taxation and the Supreme Court: .Toward aMore Unified Approach to Constitutional Adjudication?, 75 MICH. L. REv. 1426,1428-30 (1977).

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522 MISSISSIPPI LAW JOURNAL [Vol. 68

One of the major defects of the Articles of Confederation,and a compelling reason for the calling of the ConstitutionalConvention of 1787, was the fact that the Articles essentiallyleft the individual States free to burden commerce bothamong themselves and with foreign countries very much asthey pleased. Before 1787 it was commonplace for seaboardStates with port facilities to derive revenue to defray the costsof state and local governments by imposing taxes on importedgoods destined for customers in other States. At the sametime, there was no secure source of revenue for the centralgovernment.2

The Constitutional Convention of 1787 adopted the ImportExport Clause a few days after it adopted the Federal ExportClause, which forbids the federal government from imposingtaxes or duties on "articles exported from any state."3

The Import-Export Clause has long been overshadowed bythe Commerce Clause, but their roles were reversed at thePhiladelphia Convention, where commercial strife among thestates occupied center stage and evoked the passion and eloquence of the delegates, including the Convention's most memorable metaphors-New Jersey was known as the "[c]ask tappedat both ends" by New York and Philadelphia; North Carolinawas the "patient bleeding from both arms" because it was located between Virginia and South Carolina.4 The proposed remedy for this exploitation of the inland states by the seaboardstates was the Import-Export Clause. There were, to be sure,complaints about the lack of effective national commercialleadership, and the Commerce Clause was adopted to cure thisdeficiency in the Articles of Confederation by authorizing Congress to regulate interstate and foreign commerce. However,

2 Michelin Tire Corp. v. Wages, 423 U.S. 276, 283 (1976).3 U.S. CONST. art. I, § 9, cl. 5. See Brown v. Maryland, 25 U.S. (12 Wheat.)

419, 445 (1827) (stating that "[tlhere is some diversity in language [between theImport-Export and Federal Export Tax Clauses), but none is perceivable in theact which is prohibited").

• James Madison, Preface to Debates in the Convention of 1787, reprinted in 3THE RECORDS OF THE FEDERAL CONVENTION OF 1787, at 539, 542 (Max Farranded., rev. ed. 1966).


1998] THE IMPORT-EXPORT CLAUSE 523

the discussion of this issue was tame ~hen compared with thefire and brimstone that erupted during the debate over the Import-Export Clause. Indeed, the Commerce Clause seemed toevoke even less attention than the Federal Export Clause,which prohibited federal taxes or duties on "articles exportedfrom any state."5

This marked difference of tone in the Philadelphia debatesextends to the choice oflanguage in the phrasing of the ImportExport Clause and the. Commerce Clause themselves: the Import-Export Clause is detailed, reflecting its emergence from aspirited debate that aired a diversity of rival proposals forending the perceived commercial evils, while the CommerceClause is vague and general, like the terse comments supporting its adoption. On the other hand, the two provisions embodya common failing: neither answered in advance the most troublesome and important question of interpretation. For the Commerce Clause, the question was whether it operated of its ownforce to restrict state regulations of interstate commerce, evenif Congress had not preempted the subject; and for the ImportExport Clause, the unaddressed question was whether it applied to domestic and foreign commerce, or only to the latter.These issues were not settled by the Supreme Court until 1851and 1868, respectively.6

The Import-Export Clause not only attracted more attention at Philadelphia than the Commerce Clause, but its language responded so explicitly and seemingly so comprehensively7 to the commercial maladies that led up to the Annapolisconclave of 1786, and then to the Philadelphia Convention, thatit is not entirely clear what other problems were to be solved

• u.s. CONST. art. I, § 9, cl. 5.6 See generally Woodruff v. Parham, 75 U.S. (8 Wall.) 123 (1868) (stating

Import-Export Clause is limited to foreign commerce); Cooley v. Board of Wardens, 53 U.S. (12 How.) 299 (1851) (holding that states could not regulate, underCommerce Clause, those subjects that are national or that require single uniformplan of regulation).

7 "Seemingly" comprehensive because at its inception, the Import-ExportClause seemed to cover imports and exports between the states as well as in foreign commerce; only in 1868, when Woodruff v. Parham was decided, was its apparent breadth curtailed to shipments to and from foreign countries.


524 MISSISSIPPI LAW JOURNAL .[Vol. 68

by the Commerce Clause. To be sure, the Import-Export Clauserestricts only the taxing powers of the states, not their regulatory authority; the latter area of potential interstate commercial strife was subjected to centralized congressional control bythe Commerce Clause. But the commercial complaints of 1787were overwhelmingly, if not exclusively, attributed to statetaxes, not to other types of state regulation. As for use of theCommerce Clause as a lever enabling Congress to regulateprivate enterprise as well as to demolish objectionable stateregulations, there is little evidence that this extension of federal authority was the focus of the Framers' attention.

In a long-forgotten dissent in an early Import-ExportClause case, Justice Nelson offered a plausible explanation ofwhy the Commerce Clause would not do the job that was assigned to the Import-Export Clause. If, as he foresaw, the Commerce Clause was interpreted to allow the states to levynondiscriminatory taxes on merchandise regardless of its placeof origin, southern products like cotton, tobacco and rice mightbe subjected by the northern states to an ostensibly neutraltax, though in fact the tax would be tantamount to a discriminatory export tax, since the taxing states produced none of thetaxed commodity.8 Indeed, he viewed the Commerce Clause asmerely the ineffectual successor to a provision of the Articles ofConfederation,9 preserving a provision "which the framers of[the Constitution] had rejected as wholly inadequate for theprotection of interstate commerce."lO In Nelson's eyes, the Im-

8 See Woodruff, 75 U.S. (8 Wall.) at 145 (Nelson, J., dissenting).9 The provision to which Justice Nelson referred, Article IV of the Articles of

the Confederation, in relevant part, guaranteed that

the free inhabitants of each of these [sltates . . . shall be entitled to allprivileges and immunities of free citizens in the several states; and thepeople of each [sltate shall have free ingress and regress to and fromany other [sltate, and shall enjoy therein all the privileges of trade andcommerce, subject to the same duties, impositions, and restrictions asthe inhabitants thereof respectively, provided that such restriction shallnot extend so far as to prevent the removal of property imported intoany [s)tate, to any other state of which the owner is an inhabitant . . . .

ART. CONFED., art. IV (U.S. 1781).10 Woodruff, 75 U.S. (8 Wall.) at 145 (Nelson, J., dissenting).



port-Export Clause was adopted as "a more complete and thorough security to the enjoyment of the privileges of [interstate]commerce."11

It is therefore not far-fetched to suggest that as of 1789,the Commerce Clause was a handkerchief thrown over something already covered by a blanket. With the passage of time,of course, the Commerce Clause became vastly more importantthan the Import-Export Clause (perhaps partly because thelatter achieved its goals without much litigation),12 which neither empowers Congress to act (except in waiving the constraints imposed by the Import-Export Clause on the states),nor limits the state's power to impose non-tax regulations oncommerce. Even in its own bailiwick-taxes on imports and exports-the Import-Export Clause yields to the CommerceClause if the state tax falls on interstate imports and exports,rather than on foreign commerce.13 By the end of thetwentieth century, therefore, the Commerce Clause became theblanket, and the Import-Export Clause a handkerchief, covering only the few discriminatory state taxes that escape theCommerce Clause's coverage.

II. THE EARLY IMPORT-ExpORT CLAUSE CASES

The salient textual differences between the Import-ExportClause and the Commerce Clause14 are: (1) the Import-ExportClause explicitly bans "imposts or duties on imports or exports," while the Commerce Clause's restrictions on the statesare not explicit, but arise only from congressional action orfrom the dormant Commerce Clause doctrine (these barriers

11 [d. (Nelson, J., dissenting) (rejecting majority's "foreign commerce" restriction on Import-Export Clause). See generally Hinson v. Lott, 75 U.S. (8 Wall.) 148(1868) (companion case to Woodruff).

12 Today, of course, some states, rather than being tempted to tax imports orexports, seek to encourage them by establishing tax-free zones or other facilitiesto attract businesses and jobs to their areas.

13 See infra notes 21-23 and accompanying text (discussing Import-ExportClause's inability to protect interstate imports and exports).

14 Richfield Oil Corp. v. Board of Equalization, 329 U.S. 69, 75 (1946) (statingthat "[tlhe two constitutional provisions, while related, are not coterminous").



can sometimes be surmounted if the state's interest vis-a-visthe national interest in free trade is sufficiently compelling); (2)the Import-Export Clause prohibits only state fiscal action-thelevy of "imposts" and "duties"-while the Commerce Clause canrestrict a far wider array of state regulations, including alltypes of taxes;15 (3) the Import-Export Clause explicitly authorizes state imposts and duties if Congress consents, whereasthe power of Congress to authorize state regulations that wouldotherwise violate the Commerce Clause-by a so-called "reconveyance"-is a judge-made feature of the Commerce Clause;and (4) the Commerce Clause explicitly covers interstate andforeign commerce, as well as commerce with the Indian tribes,while the Import-Export Clause contains no explicit geographical limits, but as interpreted by the Supreme Court, as explained below, it applies only to foreign commerce. 16

A. Interstate Commerce and the Import-Export Clause

In Brown u. Maryland, the Supreme Court's first encounterwith the Import-Export Clause, Chief Justice Marshall assertedby way of dictum that the Import-Export Clause prohibitedstate taxes on goods imported from other states, not merelytaxes on imports from foreign lands. I? He viewed this idea,which appears at the end of his discussion of the Commerce

15 Dissenting in Camps Newfound/Owatonna, Inc. v. Town of Harrison, 520U.S. 564, 609-40 (1997), Justice Thomas proposed to eliminate the dormant Commerce Clause doctrine, suggesting that its work could properly be done by theImport-Export Clause, provided it was interpreted, as he argued it should be(contra Woodruff v. Parham), to cover interstate, not merely foreign, commerce..Id. at 1620 (Thomas J., dissenting). But even if it were thus enlarged, the Import-Export Clause could not be employed to invalidate discriminatory state regulations, as distinguished from the specific types of taxes that it covers. Id. (notingthat Import-Export Clause "seems to prohibit in plain terms . . . the more egregious state taxes on interstate commerce . . . ." (emphasis added». For an analysis and evaluation of Justice Thomas's proposal, see Brannon P. Denning, JusticeThomas, The Import-Export Clause, and Camps Newfound/Owatonna v. Harrison,70 COLO. L. REv. 155 (1999).

16 See infra notes 21-23 and accompanying text.17 Brown v. Maryland, 25 U.S. (12 Wheat.) 419, 449 (1827) (invalidating state

tax on importers of goods produced abroad; "we suppose the principles laid downin this case, to apply equally to importations from a sister [sltate").



Clause, as an alternative reason for invalidating the Marylandtax; hence his remark might be treated as referring to theCommerce Clause, rather than to the Import-Export Clause.However, the remark has been frequently viewed, seeminglywithout dispute, as Marshall's construction of the Import-Export Clause.

Marshall's theory was not surprising. The language of theImport-Export Clause is unqualified ("any imposts or duties onimports or exports"), and the pre-1787 complaints that statesforced by geography to import goods from outside their bordersor to export their locally-produced goods were exploited byneighboring states did not always distinguish between domesticand foreign goods. Marshall's conclusion was not questioned byChief Justice Taney in the 1861 decision of Almy v. California,where Taney struck down a California tax on bills of lading forgold exported from the state and bound for New York.1s Theonly question was whether the tax on the bill of lading was, ineffect, a tax on the gold itself. "If the tax was laid on the goldor silver exported," Taney wrote, "everyone would see that itwas repugnant to the [Import-Export Clause]."19 Taney thenconcluded that the tax on the bill of lading was a tax on thegoods because it was "in substance the same thing ...."20

In Woodruff, however, Marshall's "casual remark" inBrown v. Maryland was repudiated, partly on lexicographicalgrounds (that the words "import," "export," and "impost" historically referred to foreign commerce unless qualified by "somespecial form of words to show that foreign commerce is notmeant"),21 and more forcefully, on the ground that tax immunity for goods imported from another state would produce "thegrossest injustice" and negate the "equality of public burdens inall our large cities.,,22 These hyperbolic claims are puzzling,

18 Almy v. California, 65 U.S. (24 How.) 169, 175 (1860).19 Almy, 65 U.S. (24 How.) at 173.20 [d. at 174.21 But see Camps Newfound, 520 U.S. at 621 (Thomas, J., dissenting) (arguing

that scope of Import-Export Clause included interstate commerce).22 Woodruff, 75 U.S. (8 Wall.) at 137 (stating city tax on sales of merchandise,

as applied to auctioneer's sales of goods imported from other states, did not vio-



since, as noted below, the goods would, at best, enjoy only atemporary immunity, which would evaporate once they wereunpacked at their destination or commingled there with locallyproduced goods. Mr. Justice Miller, who wrote for the Court inWoodruff, also held that the challenged tax did not conflictwith the Commerce Clause. He reasoned th~t it was nondiscriminatory, and added that a tax which would "discriminateinjuriously against the products of other states or the rights oftheir citizens" would be unconstitutional under the CommerceClause, even though it did not violate the Import-ExportClause.23

Thus, restricting the Import-Export Clause to foreign commerce does not liberate the states to enact protective tariffs torestrict the inflow of goods produced in other states. To thecontrary, the dormant Commerce Clause doctrine is a shieldagainst such attempts. In West Lynn Creamery, Inc. v. Healy,for example, the Supreme Court cited a tariff as "theparadigmatic example of a law discriminating against interstate commerce ... so patently unconstitutional that our casesreveal not a single attempt by any State to enact one. In.steadthe cases are filled with state laws that aspire to reap some ofthe benefits of tariffs by other means."24 The Court's referenceto devices to get the results of a tariff "by other means" is areminder that the Commerce Clause is broader in its coveragethan the Import-Export Clause: the latter prohibits only "imposts or duties," while the former was employed in West LynnCreamery to invalidate a subsidy because, in the special circumstances of that case, it was tantamount to a tariff.

B. The Import-Export Clause and the Statusof United States Territories and Possessions

Building on Woodruffs reference to "foreign commerce" asthe beneficiary of the Import-Export Clause's prohibition, Ohioargued in Hooven & Allison Co. v. Evatt that it could levy an

late Import-Export Clause).23 [d. at 140.2. West Lynn Creamery, Inc. v. Healy, 512 U.S. 186, 193 (1994).



ad valorem tax on merchandise imported from the PhilippineIslands, which at that time constituted a territory of the UnitedStates rather than a foreign country.25 While the SupremeCourt acknowledged that the courts have "fallen into the habitof referring to imports as things brought into this country froma foreign country,"26 it ruled that the Import-Export Clause'sprotection shields articles "brought into the United States"even if they did not originate in a foreign country. The Courtthen traced the constitutional and statutory relationship between the Philippines and the United States, concluding that"the Islands have been given in many aspects, the status of anindependent government, which has been reflected in its relations as such with the outside world"27 and that:

[t]he national concern in protecting national commercialrelations, by exempting imports from state taxation, wouldseem not to be essentially different or less in the case of merchandise brought from the Philippines ... for which we haveassumed a national responsibility, than in the case of articlesoriginating on the high seas or in foreign countries. Congressis left free by the terms of the [Import-Export] clause to remove the prohibition of state taxation of imports and with itthe advantages or disadvantages, whatever they may be,arising from the tax immunity.28

Despite the Court's description of the Philippine Islands asa quasi-independent government, the opinion seems to implythat the Import-Export Clause shields imports from all American territories and possessions, even if they enjoy a lesser degree of self-government.29

25 Hooven & Allison Co. v. Evatt, 324 U.S. 652 (1945). This decision wasoverruled in 1984 on another issue. See Limbach v. Hooven & Allison Co., 466U.S. 353 (1984).

26 Hooven & Allison, 324 U.S. at 669 (emphasis added).27 [d. at 676 (footnote omitted).28 [d. at 678-79.29 See id. at 671 (stating that "there may be imports in the constitutional

sense which do not have a foreign origin. . . . [lIt is material only whether [thegoodsl came from a place without the 'country'" in determining whether it is import) (emphasis in original). For the application of the Clause to other territories,



III. THE MICHELIN TIRE CASE AND THE DEMISE OF THEORIGINAL PACKAGE DOCTRINE

In 1976, the Supreme Court startled the tax bar by overthrowing almost a century and a half of case law and adoptinga fundamentally new analysis of the Import-Export Clause. Itsvehicle was Michelin Tire Corp. v. Wages, upholding a Georgiaad valorem property tax on the taxpayer's inventory of imported tires.30 The tires were held in the company's Georgia warehouse after being transported from its manufacturing plant inFrance in so-called sea vans (over-the-road trailers with removable wheels), which were hauled from the French factory to aport of embarkation, loaded on ships bound for the UnitedStates, refitted with wheels on arrival, and trucked to theGeorgia warehouse. The tires, which were not individuallypackaged, were then removed from the vans, sorted, and storedin the warehouse, pending sale and delivery to the taxpayer'sfranchised dealers in six southeastern states.31

The disputed tax was nondiscriminatory in the sense thatit applied to all goods owned by taxpayers on Georgia's once-ayear tax assessment day, whether imported or locally produced,and therefore, it could not be characterized as "a tax [falling]on imports as such because of their place of origin."32 Underthe pre-Michelin Tire case law, however, the imported tireswould have been exempt from even nondiscriminatory taxesuntil they lost "their character as imports and [became] incorporated into the mass of property of the State."33 In determining when this crucial transformation occurred, the prevailing

see, for example Duty Free Shoppers, Ltd. v. Tax Comm'r, 464 F. Supp. 730 (D.Guam App. Div. 1979) (applying Import-Export Clause to Guam). But cf Downesv. Bidwell, 182 U.S. 244 (1901) (holding Puerto Rico not "state"; therefore, federalexport ban did not apply). See generally STANLEY K. LAUGHLIN, THE LAW OFUNITED STATES TERRITORIES AND AFFILIATED JURISDICTION 3 (1995 & 1997 Supp.).

30 Michelin Tire Corp. v. Wages, 423 U.S. 276, 302 (1976). For an incisiveanalysis of this case, see Walter Hellerstein, Michelin Tire Corp. v. Wages: Enhanced State Power to Tax Imports, 1976 SUP. CT. REV. 99.

31 Michelin Tire, 423 U.S. at 279-80.32 Id. at 286 (emphasis added).33 See Low v. Austin, 80 U.S. (13 Wall.) 29, 34 (1872).



principle was the original package doctrine, which had its origin in an 1827 Import-Export case, Brown u. Maryland, andwas then adopted and elaborated in determining when goodsmoving in interstate commerce could be taxed or otherwiseregulated by the state of destination.

Briefly stated, the original package doctrine meant that ifthe Michelin tires had been shipped in containers (e.g., fourtires per carton), they could not have been taxed by Georgia (oreven by the state of ultimate destination), until they were removed from the cartons or sold by the importer. The governingprinciples were less clear for goods shipped in bulk becausepackaging was unnecessary or impracticable (like wheat, ironore, oil or the Michelin tires), but their immunity from statetaxation ordinarily terminated when the importer "broke bulk"by unloading the goods for processing or sale. Fixing the timewhen the protection ended was also difficult if the goods wereimported by manufacturers for use in their businesses.34 Theoriginal package doctrine was much criticized,35 but in an erawhen "commerce" was often used to refer to business transactions between wholesale or large-scale "merchants," as distinguished from "trade" between local "shopkeepers" and theircustomers, the removal of merchandise from long distanceshipping containers may well have been a useful and easilyenforced way to determine when imported goods became localgoods.

The Supreme Court of Georgia, after a lengthy review ofthe major original package cases, held that the Michelin tireswere "incorporated into the mass of [Georgia] property"-so as

3. See Youngstown Sheet & Tube Co. v. Bowers, 358 U.S. 534 (1959) (upholding ad valorem property tax on imported iron ore when unloaded at place ofmanufacture), and cases cited therein.

3. For analysis of the "gossamer threads" making up the cloak of tax immunity for imports, see Melvin G. Dakin, The Protective Cloak of the Export-ImportClause: Immunity for the Goods or Immunity for the Process?, 19 LA. L. REv. 747(1959); Alexander R. Early & Robert G. Weitzman, A Century of Dissent: TheImmunity of Goods Imported for Resale From Nondiscriminatory State PersonalProperty Taxes, 7 SW. U. L. REv. 247 (1975); Thomas Reed Powell, State Taxationof Imports-When Does an Import Cease To Be an Import?, 58 HARv. L. REv. 858(1945).



to be taxable--when the tires "were sorted, segregated by sizeand style and commingled [by the taxpayer] with other shipments [in the warehouseJ."36 It therefore upheld the tax.

The Georgia decision was appealed to the United StatesSupreme Court, where both sides focused on the ambit of theoriginal package rules.37 The Court, however, chose to launchits own "independent study" of the constitutional history of theImport-Export Clause, which led it to announce--in the first"modern" Import-Export Clause case38-that "a nondiscriminatory ad valorem property tax is not the type of state exactionwhich the Framers of the Constitution ... had in mind asbeing an 'impost' or 'duty.,"39 The Court thereupon overruledLow v. Austin, the 1872 elaboration of the original package doctrine, and its corollary, that imported goods are exempt from anondiscriminatory ad valorem property tax until removed fromtheir original packages or otherwise "incorporated" into theundifferentiated mass of property located in the taxing state.40

In place of the long-entrenched original package doctrine,

.6 Wages v. Michelin Tire Corp., 214 S.E.2d 349, 355 (Ga. 1975).'7 The tax was also imposed on imported tubes stored in the warehouse,

which were packaged in corrugated cartons at the factory and still held in thesecontainers on the assessment date. The Supreme Court of Georgia held that theseitems were exempt from the Georgia tax. Wages, 214 S.E.2d at 355 (stating original package doctrine "has been almost universally applied, in a mechanical way,for about 150 years . . . IGlreat weight of authority makes a vast distinctionbetween goods shipped in packaging, such as crates or cartons, and goods shippedin bulk"). This part of its decision was not appealed.

38 It was so described by Itel Containers Int'l Corp. v. Huddleston, 507 U.S.60, 76 (1993).

• 9 Michelin Tire, 423 U.S. at 283. The opinion, written by Justice Brennan,exudes the spirit of constitutional originalism. Ten years later, Justice Brennanasserted that doctrinaire reliance on the intent of the Framers "is little morethan arrogance cloaked in humility." William J. Brennan, Jr., The Constitution ofthe United States: Contemporary Ratification, 27 S. TEX. L. REv. 433, 435 (1986).

.., See Low, 80 U.S. (13 Wall.) at 34. According to Professor Schwartz, theCourt's decision to reexamine Low sua sponte came in response to JusticeBrennan's draft opinion in Michelin Tire, which questioned Low, but did not reexamine it. See BERNARD SCHWARTZ, THE UNPUBLISHED DECISIONS OF THE BURGERCOURT 342 (1988). The Michelin Tire Court argued at length that Low v. Austinmisunderstood Brown v. Maryland, as well as the opinion of Chief Justice Taney(who had argued for the state in Brown v. Maryland) in The License Cases; 46U.S. (5 How.) 504 (1847). Michelin Tire, 423 U.S. at 282.



the Michelin Tire Court promulgated a three-part test for statetaxation of imported goods, corresponding to the three goalsthat, according to the Court, led the Framers to adopt the Import-Export Clause:

The Framers of the Constitution . . . sought to alleviatethree main ·concerns by committing sole power to lay impostsand duties on imports in the Federal Government, with noconcurrent state power: [1] the Federal Government mustspeak with one voice when regulating commercial relationswith foreign governments, and tariffs, which might affect foreign relations, could not be implemented by the States consistently with that exclusive power; [2] import revenues were tobe the major source of revenue of the Federal Governmentand should not be diverted to the States; and [3] harmonyamong the States might be disturbed unless seaboard States,with their crucial ports of entry, were prohibited from levyingtaxes on citizens of other States by taxing goods merely flowing through their ports to the other States not situated asfavorably geographically.41

The Court then proceeded to apply each of these tests ofconstitutional validity to Georgia's ad valorem tax on the implicit ground that the Clause prohibits a state tax if, but onlyif, it has a propensity to interfere with one of the Clause's threeobjectives.42 Such a nondiscriminatory property tax does not

4' Michelin Tire, 423 U.S. at 285-86 (footnotes omitted; bracketed numbersadded). This explication of the Import-Export Clause is, by its terms, limited tothe status. of imports. Indeed, the second element of the test is irrelevant in thecase of exports because Congress is forbidden to levy export taxes; but the Courtextended it to exports in Washington v. Association of Washington StevedoringCos., 435 U.S. 734 (1978).

42 Though Justice Brennan's articulation and elaboration of the Framers' animating purposes behind the Import-Export Clause assumed the nature of a tripartite "test," the logical conclusion, viz., that taxes failing one or more of theelements of the test were unconstitutional, was implicit, rather than stated explicitly. Michelin Tire, 423 U.S. at 286 (stating that nondiscriminatory ad valoremtax, "unlike discriminatory state taxation against imported goods and imports,was not regarded as impediment that severely hampered commerce or constitutedform of tribute by seaboard States to the disadvantage of other States"). On thispoint, see the contrary view of Professor William W. Crosskey, who concluded



conflict with the first of the three purposes of the Import-Export Clause (the "one voice" point), according to the Court,because it "does not fall on imports as such because of theirplace or origin . . . cannot be used to create special protectivetariffs or particular preferences for certain domestic goods,and . . . cannot be applied to encourage or discourage importsin a manner inconsistent with federal regulations. »43 Such atax, therefore, "can have no impact whatsoever on the FederalGovernment's exclusive regulation of foreign commerce, probably the most important purpose of the Import-Export Clause's

that the remedy of the Framers was intended to bar all taxes:

This overburdening of out-of-state products [by state taxation] is frequently intentional; but as often, perhaps, it is the result of chance,chance that consists in the unforeseen and frequently unperceived multiple hitting of the same product at different stages in its production, itsdistribution, or its consumption, by the independently determined, infinitely complicated, and constantly varying duty systems of our severalstates. From this last cause, if from no other, it would be hopelesslyinsufficient to interdict such taxes, only when the evils in question arefound actually to be present. For the presence of the evils is too difficultof detection, and too dependent upon factors constantly varying, for anyconditional and qualified interdiction to be effective. The one practicableremedy, in any federal national state, is to forbid such taxes absolutelyto the component parts; and thereby to drive those parts-i.e., the states-into other forms of taxation, which are insusceptible of use to attain,and not likely to produce accidentally, the undesired results. And thisremedy, it appears, is the one the framers of the Constitution adopted.

1 WILLIAM W. CROSSKEY, POLITICS AND THE CONSTITUTION IN THE HISTORY OF THEUNITED STATES 297 (1953).

.. Michelin Tire, 423 U.S. at 285-86. For subsequent applications of theMichelin Tire case, see R.J. Reynolds Tobacco Co. v. Durham County, 479 U.S.130, 131-32 (1986) (holding that state ad valorem tax did not violate Import-Export Clause as applied to imported tobacco stored in customs warehouse awaitingdomestic manufacture and sale; that there is "nothing transitory" about tobaccowhich has reached its destination so that "only payment of customs duty, afterthe appropriate aging, separates it from entrance into the domestic market"); LosAngeles v. Marine Wholesale Co., 19 Cal. Rptr. 2d 664, 669-71 (Cal. Ct. App.1993) (stating that Import-Export Clause was not violated by city's nondiscriminatory tax on gross receipts and payroll, as applied to goods stored in federallyregulated customs bonded warehouse); Blue Star Line v. San Francisco, 143 Cal.Rptr. 647, 652-53 (Cal. Ct. App. 1978) (upholding San Francisco payroll tax onemployers doing business within city limits under Michelin Tire against challenge,under Foreign Commerce and Import-Export Clauses, by steamship lines, agentsand stevedore firms engaged in foreign maritime commerce at city's ocean port).



prohibition."44

The most obvious state fiscal action that would conflictwith the federal government's right to speak in ."one voice" inconducting foreign affairs would be an open and avowed statetariff (e.g., a California duty of one dollar per liter of wine imported from France, a measure that might be designed to makelocal wines seem like a bargain). Such a tax would increase thecost of French wines and thus penalize California's residents45

without producing any revenue for the state, because the Import-Export Clause requires the net revenues from state taxeson imports and exports to be held for the federal government.With such a tax in place, the President or Secretary of Statewould no doubt encounter heavy seas in persuading Francethat the United States is committed to free international tradeor that France should lower its duties on U.S.-made products.

But other state taxes, including some that are nondiscriminatory,46 could also offend a prickly foreign government, particularly if the tax is only superficially nondiscriminatory because it falls on a class of goods that are produced in the taxingstate only in small quantities or not at all, such as a North Dakota tax on caviar. Indeed, it is not inconceivable that a foreigngovernment would object to the very tax upheld in MichelinTire, on the ground that its once-a-year feature may charge theimporter an undue amount for as little as one day of storage,resulting in an unjustified increase in the price American consumers must pay for goods imported from the complaining

•• Michelin Tire, 423 U.S. at 286... This "self-inflicted" wound point was recognized by Chief Justice Marshall

in Brown u. Maryland, 25 U.S. (12 Wheat.) at 440 (stating that "[w)hen we areinquiring whether a particular act is within this prohibition, the question is not,whether the State may so legislate as to so hurt itself, but whether the act iswithin the words and mischief of the prohibitory clause").

.. The Court uses "nondiscriminatory tax" at least twenty-one times inMichelin Tire, but does not define the term. In a sense, every tax is discriminatory, since it taxes what it taxes but not what it doesn't tax. For example, theGeorgia "nondiscriminatory" ad valorem tax is levied on property held by thetaxpayer on the tax-assessment date, but not on property owned on any of the364 remaining days of the taxable year, and such taxes often distinguish betweenreal and other types of property, between business and non-business property, andbetween non-profit and for-profit owners.



government's producers, particularly if the products encountertwo or more tax assessment days while en route through anumber of states to the customer. In close cases, rather thanspeculate on the impact of a challenged tax, counselor thecourt might want to request the State, Justice or TreasuryDepartment to express an opinion on whether the tax impairsthe government's ability to "speak with one voice" in negotiations with foreign governments!7

Turning to the Import-Export Clause's second goal, theSupreme Court asserted in the Michelin Tire case that nondiscriminatory taxation like Georgia's ad valorem property taxdoes not "deprive the Federal Government of the exclusiveright to all revenues from imposts and duties on imports andexports, ... [and hence] deprives the Federal Government ofnothing to which it is entitled.'>48 Moreover,

[u]nlike imposts and duties, which are essentially taxes onthe commercial privilege of bringing goods into a country, ...[nondiscriminatory] property taxes are taxes by which Stateapportions the cost of such services as police and fire protection among the beneficiaries according to their wealth [and]there is no reason why an importer should not bear his shareof these costs along with his competitors handling only domestic goods.49

Presumably, police and fire protection was mentioned only asan illustration, and was not intended to imply that importerscould not also be required to bear part of the state's entire

47 But for an example where the Court refused to be bound by thegovernment's opinion that a state law did not affect the government's ability tomanage foreign affairs, see Zschernig v. Miller, 389 U.S. 429 (1968); see alsoLoms HENKIN, FOREIGN AFFAIRS AND THE UNITED STATES CONSTITUTION 163-64(2nd ed., 1996).

•• Michelin Tire, 423 U.S. at 286-87. The reference in Michelin Tire to revenues from export duties, like the similar reference in the Import-Export Clauseitself, is puzzling since the federal government has no right, let alone an "exclusive" one, to tax exports by virtue of the Federal Export Tax Clause; thus, astate tax on exports by definition cannot deprive the United States of anything"to which it is entitled."

•• [d.



budget, including the cost of educating its children and itswelfare programs for the indigent and homeless.

Unlike the Court's first test of the Georgia tax's validity,the diversion of income test does little to separate tax sheepfrom tax goats, because if a state taxes imports or exports, theImport-Export Clause provides that the net revenue "shall befor the use of the Treasury of the United States;" thus, there isno diversion, except perhaps temporarily. The Court, however,did not mention this point; perhaps its theory was that a statetax is invalid if, but for the Import-Export Clause's federalinurement provision, it would divert import revenues awayfrom the United States. If this theory is accepted, however, itseems to follow that the federal-inurement provision is a deadletter, because any tax that could in theory generate importrevenue would be invalid ab initio, and thus would produce nonet revenue to be held by the state for the federal government,except for the crumbs, if any, left on the table by taxpayerswho paid the tax and failed to request refunds in time.50

Finally, the Court ruled in Michelin Tire that Georgia's taxdid not violate the third test of constitutional validity (preservation of interstate harmony) that it distilled from the ImportExport Clause's constitutional history, because nondiscriminatory ad valorem property taxes "do not interfere with the freeflow of imported goods among the states, as did the exactionsby States under the Articles of Confederation directed solely atimported goodS."51 In support of this assertion, the Court noted that importers of goods destined for delivery to inland statescan "easily avoid" taxes imposed by seaboard states by usingair freight, containerized packaging, rail and water routes, andother means that would bypass the taxing state. To this oddsuggestion that a challenged tax might be sanitized by thepossibility of easy avoidance, the Court added another

50 Madison described the federal-inurement proviso "as preventing all Stateimposts." See Brennan's discussion and hypothetical questions, id. at 302 n.13. Inits potential application to state imposts on exports, the federal-inurement provision conflicts in spirit with the Federal Export Tax Clause, which forbids Congress to tax exports.

51 [d. at 288.



point-really no more than a repetition of the tax benefit theory adduced to establish that the Georgia tax surmounted thesecond policy test-that any increase in the cost to out-of-statepurchasers of the taxpayer's tires caused by Georgia's tax wasa quid pro quo for the public services supplied by Georgia toimporters and non-importers alike. "IDtimate consumers," theCourt observed, "should pay for such services as police and fireprotection accorded the goods just as much as they should paytransportation costs associated with these goods."52

This analysis evidently presupposes that if the states ofdestination complained about Georgia's ad valorem propertytax (which, the Court acknowledged, would increase the cost ofimported goods), the complaint would be unwarranted, presumably because the state of destination, if it responded in a reasonable manner, would admit that Georgia's services wereworth their cost. The ad valorem property tax is, at best, arough and ready device to charge for the benefits conferred onthe owner by the taxing state, since taxpayer A may enjoy 364days of police and fire protection but pay nothing if its propertyis not in the state on the once-a-year tax assessment day, whiletaxpayer B may have to pay for 365 days of state services, eventhough its property tarries in the state for only one day.53 TheJustices did not address this point, perhaps because it was notraised by the taxpayer. If it had been, the Court might haveconcluded that they would find themselves in a quagmire ifthey undertook to judge whether taxpayers get their money'sworth from the tax burdens they bear.

Moreover, if the intent of the Framers is to be controlling,as the Michelin Tire case presupposes, one might wonderwhether the inland states, in the era of the Articles of Confederation, complained about taxes levied by seaboard states onlyif they exceeded the value of the services that the taxing states

52 [d. at 289 (footnote omitted).53 For apportionment of a California ad valorem tax under the Commerce

Clause, based on the number of the taxpayer's cargo containers present in California on average during the taxable year, rather than the number that happened tobe in the state on the assessment day, see Japan Line, Ltd. v. Los Angeles, 441U.S. 434, 445 n.8 (1979).



supplied to the imported goods while they were in transit. Ifthose ancient complaints were in fact qualified by a "tax benefit" concession, the evidence is not adduced in the Michelin Tireopinion.

Continuing its explanation of the third goal of the ImportExport Clause, the Court asserted: "In effect, the [Import-Export] Clause was fashioned to prevent the imposition of exactions which were no more than transit fees on the privilege ofmoving through a State."54 At first glance, this historical explanation implies that the Import-Export Clause does not prohibit taxes on imported goods by the state of destination even ifdiscriminatory or, in the case of exported goods, an export taxby the state of origin. But if the Import-Export Clause's function today is solely to outlaw "transit fees" by states throughwhich imports and exports pass, a repeal of the Clause wouldhardly be noticed, because virtually any exaction levied solelyfor the privilege of transit would be a regulation of foreigncommerce in violation of the Commerce Clause. Another way ofputting the point is that the brave new approach of theMichelin Tire case comes close to depriving, in one fell swoop,both the Import-Export Clause, and the first and second testsof Michelin, of any independent function.

It is doubtful, however, that the Supreme Court intendedto adopt so radical a "new approach" to the Import-ExportClause. The Court may well decide that the Clause's prohibition extends beyond mere transit fees; certainly, the languagechosen by the Framers is broader than necessary to accomplishthat limited objective. Conversely, however, the Court maydecide that transit fees are not necessarily invalid, leavingroom for states to charge for the benefits (e.g., police and fireprotection) they provide to goods while in transit and for theexpense they impose on the state (e.g., road repairs), even if

5. Michelin Tire, 423 U.S. at 290 (emphasis added) (footnote omitted); see alsothe reference in the next sentence to property taxes "on goods which are merelyin transit through the State when the tax is assessed." Id. (emphasis added). Foran earlier analysis of this issue, see generally Thomas Reed Powell, Taxation ofThings in Transit (pt. 1), 7 VA. L. REv. 167 (1920).



local entrepreneurs who receive imports or originate exportsare exempted from the transit charges because they bear theirshare of the state's expenses, by paying other taxes that goodsin transit escape. Moreover, even an "in transit" tax that forsome reason cannot be justified as a quid pro quo for the taxingstate's benefits and burdens, might be validated as an inspection fee in appropriate circumstances (e.g., to determine if thegoods in transit are dangerously toxic).

IV. "IMPOSTS OR DUTIES ON IMPORTSOR EXPORTS" AFTER MICHELIN TIRE

In deciding Michelin Tire, the Supreme Court devoted themain body of its opinion to a lengthy explication of the preratification history and objectives of the Import-Export Clause,but it did not explicitly anchor its threefold test of the constitutionality of state taxation to the operative language of theClause-uNo state shall ... lay any Imposts or Duties on Imports or Exports." Indeed, the Court began its brief analysis ofthis language by admitting that "the wording of the prohibitionof the Import-Export Clause does not in terms except nondiscriminatory taxes with some impact on imports or exports."55The Court then pointed out a second, equally obvious, featureof the language used by the Clause-that it does not prohibitall taxes on imports and exports, but only "imposts" and "duties"-and the Court contrasted this restricted list of prohibitedexactions with the broader power of Congress, created by Article I, Section 8, Clause 1, to "lay and collect taxes, duties, imposts and excises.,,56 The issue is further complicated by thereference in the Federal Export Tax Clause (Article I, Section9, Clause 5) to a "tax or duty" on exports,57 and in the Uni-

55 Michelin Tire, 423 U.S. at 290.56 See id.51 In United States u. IBM Corp., the Court observed that in Michelin Tire,

"we left open the possibility that a particular state assessment might not properlybe called an impost or duty, and thus would be beyond the reach of the ImportExport Clause, while an identical federal assessment might properly be called atax, and would be subject to the Export Clause." United States v. IBM Corp., 517U.S. 843, 857 (1996).



formity Clause (Article I, Section 8, Clause 1) to "duties, imposts and excises."

For help in defining "imposts" and "duties," the Courtturned in Michelin Tire to Professor Crosskey's "persuasivedemonstration" that in 1787, these terms were "well understood to be exactions upon imported goods as imports. "58 Butwhile Crosskey's book, a veritable lexicon of late eighteenthcentury legal and business terminology, establishes that thetroublesome terms "imposts" and "duties" sometimes referred totaxes on "imports as such," it shows that they were also usedas labels for taxes on a broad array of other products andevents.59 Moreover, if one were really won over by Crosskey's"persuasive demonstration," one would have to reject Woodruffv. Parham, and apply the Import-Export Clause to interstate aswell as foreign commerce, since that decision was the mainimpetus for his search for the eighteenth century meanings of"imposts" and "duties" as used in the Import-Export Clause,and his search led to the conclusion that "it would be fantasticto suggest that the Americans of the time could have read the[Import-Export] Clause as applying to 'foreign imports' and'foreign exports' only."60

Rather than follow Crosskey, however, the Court quicklyterminated its excursion into eighteenth century lexicography,and implicitly acknowledged that the Michelin Tire case couldnot be settled by consulting the dictionary: "The terminologyemployed in the Clause-'Imposts or Duties'-is sufficientlyambiguous that we decline to presume it was intended to embrace taxation that does not create the evils the Clause wasspecifically intended to eliminate. ,,61

Despite this acknowledgment that the Framers' terminology is ambiguous, the Court reached an eminently plausibleconclusion in defining "imposts or duties on imports" as taxes

8. Michelin Tire, 423 U.S. at 290-91 (emphasis supplied). See also 1 CROSSKEY,supra note 42, at 296-97.

8. See 1 CROSSKEY, supra note 42, at 297-300.60 [d. at 304.61 Michelin Tire, 423 U.S. at 293-94.



levied on "imports as such" or on "products because of theirforeign origin."62 The Court, therefore, was on sound groundwhen it ruled that the Import-Export Clause does not shieldimports and exports from such broad-based state levies as thead valorem property tax upheld by Michelin Tire, where thechallenged tax was not aimed at imports or exports, as such,but reached them only because they happened to be in the lineof fire, like innocent bystanders, so to speak.63

In its lexicographic analysis of the Import-Export Clause,the Michelin Tire Court did not turn its attention to anotherambiguity-that the Clause prohibits state taxes only if they

.2 [d. The defining element "as such" is used at least twice in the MichelinTire opinion, and "foreign origin" appears at least four times. This interpretationof the Import-Export Clause was explicitly rejected in Low v. Austin, where theCalifornia Supreme Court ruled that certain imported goods were taxable "becausethe tax levied is not directly upon imports as such, and consequently the goodsimported are not subjected to any burden as a class, but are included [for taxationl as part of the whole property of its citizens which is subjected equally to advalorem tax." Low, 80 U.S. (13 Wall.) at 34. The Court stated further in RichfieldOil Corp. v. Board of Equalization that the Import-Export Clause imposed an"absolute prohibition," from which nondiscriminatory taxes could not be exempted,quoting with approval Chief Justice Taney's announcement that "[iln expoundingthe Constitution of the United States, every word must have its due force, andappropriate meaning; for it is evidence from the whole instrument, that no wordwas unnecessarily used, or needlessly added." Richfield Oil Corp. v. Board ofEqualization, 329 U.S. 69, 77 (1946) (quoting Holmes v. Jennison, 39 U.S. (14Pet.) 540, 570-71 (1840» (holding state retail sales tax invalid as applied to oilpumped from taxpayer's storage tanks into vessel for shipment to New Zealand).Since the Clause explicitly granted only one exemption from its prohibition (forthe state's necessary inspection expenses), the Court ruled that no other exemption (e.g., for nondiscriminatory taxes) could be applied. Richfield Oil Corp., 329U.S. at 76. But see Peck & Co. v. Lowe, 247 U.S. 165, 174, 175 (1918) (holdingthat Federal Export Tax Clause does not prohibit federal income tax on net income from export sales, (1) since "[tlhe tax is levied after exportation is completed, after all expenses are paid and losses a<ljusted, and after the recipient of theincome is free to use it as he chooses. . . . IWlhat is taxed-the net income-isas far removed from exportation as are articles intended for export before theexportation begins;" and (2) federal income tax "is not laid on income from exportation because of its source, or in a discriminative way, but just as it is laidon other income").

G3 See supra notes 32-40 and accompanying text. Michelin Tire supports theidea that imports and exports in "transit" through a state might be immune fromtaxation even if the tax is nondiscriminatory. See supra notes 32-40 andaccompanying text.



are "on" imports or exports. Of course, imports and exports donot pay taxes, people do; but that does not mean that the term"on" is meaningless. Its meaning came before the Court asearly as 1827, when Chief Justice Marshall ruled in Brown v.Maryland,64 the Court's first Import-Export Clause case, thata state occupational tax on importers was within the purviewof the Import-Export Clause.65 Rejecting the argument that"this is not a tax upon the [imported] article, but on the person," he wrote:

All must perceive, that a tax on the sale of an article, imported only for sale, is a tax on the article itself. It is true,the state may tax occupations generally, but this tax must bepaid by those who employ the individual, or is a tax on hisbusiness. The lawyer, the physician, or the mechanic, musteither charge more on the article in which he deals, or thething itself is taxed through his person. This the State has aright to do, because no constitutional prohibition extends to it.So, a tax on the occupation of an importer is, in like manner,a tax on importation. It must add to the price of the article,and be paid by the consumer, or by the importer himself, inlike manner as a direct duty on the article itself would bemade. This the state has not a right to do because it is prohibited by the constitution.66

Chief Justice Marshall's lead was followed by later courts,which similarly applied the Import-Export Clause to taxes onactivities so connected with the goods that the levy could beplausibly described as a tax "on the article itself." Thus, inAlmy v. California, the Court invalidated a California stamptax on bills of lading for the transportation of gold or silver,because the intention was "to lay a tax on the gold and silverexported, and not upon ~articles of any other description."67 In

•• 25 u.s. (12 Wheat.) 419 (1827).65 Brown, 25 U.S. (12 Wheat.) at 447-48.

... Id. at 444. The rejected argument was advanced by Roger Taney, counselfor Maryland, who stuck to his guns and resuscitated the claim when he succeeded Marshall in the Chief Justice's chair. See The License Cases, supra note 40.

• 7 Alroy v. California, 65 U.s. (24 How.) 169, 174 (1861). Although decided before, the Court, in Woodruff v. Parham, confined the prohibition to goods shipped



Thames & Mersey Marine Insurance Co. v. United States,68 theCourt extended the constitutional prohibition a bit further toencompass policies of marine insurance on exported goods.69

The taxable document in each of these cases was readilyviewed as a "proxy" for the goods themselves, since in commercial practice the bill of lading and accompanying policy of marine insurance are often essential to a legally effective transferof the goods.70

In 1951, however, the Court drew back from this expansiveconstruction in Canton Railroad Co. v. Rogan,71 which involved a state tax on the gross receipts of a railroad that operated a marine terminal, which handled goods arriving fromabroad or consigned to foreign buyers.72 The Court acknowledged that "the prohibition of the Import-Export Clause againsttaxes on imports and exports involves more than an exemptionfrom taxes laid upon the goods themselves,"73 but it rejectedthe taxpayer's claim that "its handling of the goods, which aredestined for export or which arrive as imports"74 immunized itagainst a state gross receipts tax:

The broader definition which appellant tenders distorts theordinary meaning of the terms. It would lead back to everyforest, mine, and factory in the land and create a zone of taximmunity never before imagined. For if the handling of thegoods at the port were part of the export process, so wouldhauling them to or from distant points or perhaps miningthem or manufacturing them.75

to or from foreign countries, Woodruff did not undermine the Almy propositionthat the tax was "on" the property covered by the taxed document. Woodruff, 75U.S. (Wall.) at 137.

68 237 U.S. 19 (1915).69 Thames & Mersey Marine Ins. Co., 237 U.S. at 27.70 Id. at 26. See United States v. IBM Corp., 517 U.S. 843, 879-80 (1996)

(Kennedy, J., dissenting) (explaining concept of "a proxy for taxing the goods").71 340 U.S. 511 (1951).72 Canton R.R. Co., 340 U.S. at 512.73 Id. at 514.74 Id.7S Id. at 515.



The Court went on to hold that a tax on the taxpayer'sreceipts from renting a crane to stevedoring companies, whoused the crane in loading and unloading imports and exports,was too remote from the goods to be invalidated by the ImportExport Clause.76 Intimating that a tax on the activities of thestevedoring firms might qualify for protection, the Court concluded "that any activity more remote than that does not commence the movement of the commodities abroad nor end theirarrival and therefore is not a part of the export or import process."77 In still another encounter with the pestiferous preposition "on," in Itel Containers International Corp. v.Huddleston/8 the Court ruled that a Tennessee sales tax imposed on the proceeds of leasing cargo containers for use exclusively in international shipping was not prohibited by the Import-Export Clause, for the reason that it was "levied on leasestransferring temporary possession of containers to third parties . . . not on the containers themselves or on the goods beingimported in those containers."79

The elusive preposition "on" also appears in the FederalExport Clause, prohibiting any federal tax or duty "on articlesexported from any state," and the similarity of language between this Clause and the Import-Export Clause has resultedin what the Supreme Court has called "our longstanding parallel interpretations of the two Clauses."80 In United States v.IBM Corp., a Federal Export Clause case, the Court pointedout that it had "struck down taxes that were not asserted directly on goods in export transit, but which [it] found to be soclosely related as to be effectively a tax on the goods them-

,. Id.11 Id. (emphasis added). The Canton Railroad Co. case was followed by De

partment of Revenue v. Association of Wash. Stevedoring Cos., which narrowed the"in transit" exception suggested by Michelin Tire by denying Import-Export Clauseimmunity to a state tax that "does not fall on the [imported or exported) goodsthemselves [but) only on the business of loading and unloading ships." 435 U.S.at 755.

18 507 U.S. 60 (1993).19 Itel Containers Int'l Corp., 507 U.S. at 77 (Justice Scalia concurring only in

judgment on this issue; Justice Blackmun dissenting on other grounds).80 IBM Corp., 517 U.S. at 853.



selves," but added that it had never "carefully defined how wedecide whether a particular federal tax is sufficiently related tothe goods or their value to violate the Export Clause."81 TheCourt seemed poised to reconsider its holding in Thames &Mersey Manne Insurance Co. v. United States, a leading example of the "closely related" approach; but the government didnot challenge that decision; and in the interest of stare decisis,the Court did not disturb it.82

V. "EXPORTS" AFTER MICHELIN TIRE

Before Michelin Tire, goods shipped to foreign shoresgained immunity from state taxation under the Import-ExportClause upon their "entrance into the export stream."83 Thiswas a shorthand expression for a principle set out in Cae v.Erroll,84 which held that under the dormant Commerce Clausedoctrine,

goods do not cease to be part of the general mass of propertyin the state, subject, as such, to its jurisdiction, and to taxation in the usual way, until they have been shipped, or entered with a common carrier for transportation, to anotherstate, or have been started upon such transportation in acontinuous route or journey.85

For exports, this boundary line is the counterpart of the original package doctrine as applied to imports, which was notsuitable for exported goods, because they are often packed bythe manufacturer in identical containers, whether they are tobe shipped to foreign countries, other states, or even other loca-

81 Id. at 855 n.3.82 Thames & Mersey Marine Ins. Co., 237 U.S. at 27 (1915).83 See Kosydar v. National Cash Register Co., 417 U.S. 62, 67 (1974), and cas

es there cited; see also IBM Corp., 517 U.S. at 871 (complaining of "factual morass of determining when exportation has begun"); Leslie W. Abramson, StateTaxation of Exports: The Stream of Constitutionality, 54 N.C. L. REv. 59 (1975).For the effect of interruptions en route, see Champlain Realty Co. lJ. Brattleboro,260 U.S. 366 (1922).

.. 116 U.S. 517 (1886).88 Cae, 116 U.S. at 527.



tions within the state of manufacture. Since identically-packaged goods cannot be distinguished at this point from "thegeneral mass of property in the state [of manufacturel," it wasnecessary to find an alternative starting line for exports toserve as the analogue of the original package rule for imports.S6

Like the original package rule, the "stream of export" ruleengendered some close cases.87 A defense of this principle canbe found in Kosydar u. National Cash Register CO.,88 upholdinga state ad valorem tax on machines built to foreign buyers'specifications and awaiting shipment abroad, with possessionand title still in the manufacturer, even though exportationwas virtually certain. Movement to foreign shores, however,had not started, and the Court observed:

It may be said that insistence upon an actual movementinto the stream of export in the case at hand represents anoverly wooden or mechanistic application of the Coe doctrine.This is an instance, however, where we believe that simplicityhas its virtues. The Court recognized long ago that even if itis not an easy ~atter to set down a rule determining themoment in time when articles obtain the protection of theImport-Export Clause, "it is highly important, both to theshipper and to the State, that it should be clearly defined soas to avoid all ambiguity or question."89

When Michelin Tire repudiated the original package rulefor imports in favor of a new approach to the Import-Export

86 [d. at 525.87 See, e.g., Richfield Oil Corp. v. Board of Equalization, 329 U.S. 69, 82-83

(1946) (invalidating California sales tax as applied to oil produced in Californiaby taxpayer and shipped by pipeline to its storage tanks in California harbor,then pumped into oil tanker for delivery to New Zealand; transfer of oil fromtaxpayer's storage tanks into hold of vessel was start of oil's "export journey"),and cases there cited.

68 417 U.S. 62 (1973).8' Kosydar, 417 U.S. at 71 (quoting Coe, 116 U.S. at 526). In addition, the

Court reiterated its support for previous decisions holding that "the protections ofthe Import-Export Clause are not available until the article . . . begins its physical entry into the stream of exportation." [d. Thus tax immunity is negated basedon subjective factors like a manufacturer's intent to export.



Clause, by which a challenged state tax was tested to ascertainif it threatened the evils which the Clause was intended toprevent, disenchantment with the "stream of export" rule-theoriginal package rule's counterpart-was almost a foregoneconclusion. A turnabout came only two years after MichelinTire, when the Court announced in Washington Department ofRevenue v. Association of Washington Stevedoring Cos. that"the Michelin approach should apply to taxation involving exports as well as imports."90 Michelin Tire dealt only with aproperty tax, while the Washington Stevedoring tax was leviedon business income, but the Court did not distinguish betweenthem on this flimsy ground, perhaps because it assumed thatthe taxation would be reflected in the price of both the goodsthat were taxed in Michelin Tire and those that were handledby the taxed stevedoring firms in Washington Stevedoring. Inextending its new import rule to exports, the Court might havepointed out that the Import-Export Clause forbade taxes onexports for the same reason it barred import taxes, i.e., todampen down the commercial strife between the seaboardstates and their inland neighbors; thus, North Carolina was "apatient bleeding at both armsn91 because Virginia and SouthCarolina, with their port cities, could levy import duties onforeign goods bound for North Carolina and export duties onNorth Carolina's tobacco en route to foreign lands.

The right of the state of origin to tax its own exports, however, seems to require separate analysis, since such a levywould not, absent unusual circumstances, disturb the exportingstate's neighbors or deprive the federal government of importrevenues, two of the results that the Import-Export Clause, asinterpreted by Michelin, was intended to prevent. Raising thecost of export goods to foreign customers may undermine thefederal government's power "to speak with one voice when

9. Washington Dep't of Revenue v. Association of Wash. Stevedoring Cos., 435U.S. 734, 758 (1978), overruling Puget Sound Stevedoring Co. v. State TaxComm'n, 302 U.S. 90 (1937) (establishing decision based on Commerce Clause, butforeign commerce aspect could have been based on Import-Export Clause).

91 See supra note 4 and accompanying text.



regulating commercial relations with foreign governments,"92and thus frustrate the first goal of the Import-Export Clause.Moreover, a state may thus interfere with the constitutionalauthority of Congress to regulate foreign commerce, in violationof the dormant Commerce Clause principle.

VI. GoODS IN TRANSIT

In the Michelin Tire case, the Supreme Court came close toruling that state taxes on imports and exports are never subject to the prohibitions of the Import-Export Clause if the goodsare taxed only as part of a broader nondiscriminatory tax base,such as Georgia's general ad valorem property tax; but theCourt drew back at the last minute by hinting that the constitutional prohibition might apply to "nondiscriminatory propertytaxes on goods that are merely in transit through the Statewhen the tax is assessed. n93 This tentative reservation did notembrace the tires in Michelin Tire because, the Court ruled,they were "no longer in transit," but were instead stored in adistribution warehouse that was operated "no differently thanwould be a distribution warehouse operated by a wholesalerdealing solely in domestic goods.94

The Michelin Tire in-transit reservation evidently assumesthat the goods remain "imports" until they arrive at their ultimate destination. However, the Court also appears to assumethat a nondiscriminatory tax can meet the threshold MichelinTire requirement that the tax be levied on imports or exportsas such or because of their foreign origin. Moreover, the "intransit" reservation requires a qualification to avoid going toofar. For example, would it prohibit a nondiscriminatory state

92 See supra notes 41-47 and accompanying text.• 3 Michelin Tire, 423 U.S. at 290. For a discussion of ambiguities in defining

the term "in transit," see Hellerstein, supra note 30, at 122-26. In United Statesu. IBM Corp, involving the constitutional prohibition of a federal tax on exports,the government argued that the Supreme Court's "Import-Export jurisprudencenow permits a State to impose a nondiscriminatory tax directly on import orexport transit." IBM Corp., 517 U.S. at 861-62. This reading of the case law wasrejected by the Court, though by way of dictum. Id.

•• Michelin Tire, 423 U.S. at 302.



inheritance tax on a case of jeroboams of Lafitte Rothschild,vintage 1962, if the owner died while the wine was en routefrom Bordeaux to Chicago, and his will left the prized cargo toWalter Hellerstein?

Two years after deciding Michelin Tire, the Court had anopportunity to expand on its tantalizing hint about taxes ongoods in transit when it decided Department of Revenue v.Association of Washington Stevedoring Companies.95 Upholding a Washington tax on the gross income or receipts of "everyperson engaging within this state in any business activity," asapplied to stevedoring firms that engaged in interstate andforeign commerce by loading and unloading ships in PugetSound,96 the Court followed Michelin Tire's iconoclastic leadby overruling two cases, one of them more than forty years old.However, it reserved judgment on Michelin Tire's "in transit"suggestion.

First, the Court rejected the taxpayers' claim that the taxwas unconstitutional under the dormant Commerce Clausedoctrine. Looking to "the practical effect of the exaction," theCourt pointed out that it had "repeatedly ... sustained taxesthat are applied to activity with a substantial nexus with theState, that are fairly apportioned, that do not discriminateagainst interstate commerce, and that are fairly related to theservices provided by the State"; thus, the Washington tax satisfied the standard Commerce Clause mantra of constitutionality-that "interstate commerce must bear its fair share of thestate tax burden."97

The Court then proceeded to examine the stevedoringfirms' claim that the tax violated the Import-Export Clause, achallenge that applied only to their activities in foreign commerce. The issue was not settled by the Court's CommerceClause ruling, which unlike the Import-Export Clause, called

95 See supra note 90.96 Association of Wash. Stevedoring Cos., 435 U.S. at 738 n.4. See also Dia

mond Shamrock Ref. & Mktg. Co. v. Nueces County Appraisal Dist., 876 S.W.2d298 (Tex. 1994).

97 Association of Wash. Stevedoring Cos., 435 U.S. at 750.



for a balancing of the interests of the taxpayers and the state.Applying the Michelin Tire analysis,98 the Court concludedthat the Washington tax did not generate any of the evils thatthe Import-Export Clause was intended to prevent:

First, the tax does not restrain the ability of the FederalGovernment to conduct foreign policy. As a general businesstax that applies to virtually all businesses in the State, it hasnot created any special protective tariff.... No foreign business or vessel is taxed. Respondents, therefore, have demonstrated no impediment posed by the tax upon the regulationof foreign trade by the United States.

Second, the effect of the Washington tax on federal import revenues is identical to the effect in Michelin Tire. Thetax merely compensates the State for services and protectionextended by Washington to the stevedoring business. Anyindirect effect on the demand for imported goods because ofthe tax on the value ofloading and unloading them from theirships is even less substantial than the effect of the direct advalorem property tax [upheld in Michelin Tire] on the imported goods themselves.

Third, the desire to prevent interstate rivalry and friction does not vary significantly from the primary purpose ofthe Commerce Clause.... The third Import-Export Clausepolicy, therefore, is vindicated if the tax falls upon a taxpayerwith reasonable nexus to the State, is properly apportioned,does not discriminate, and relates reasonably to services provided by the State.99

In this formulation of the third test of constitutionality, theWashington Stevedoring case departed from the third ImportExport Clause test as promulgated by Michelin, and substitut-

98. It is not clear that the Washington tax could be described as levied on"imports as such" or "exports as such," as required by Michelin Tire, since the taxevidently applied to the taxpayer's receipts from handling cargo in Puget Sound,whether the shipments involved foreign, interstate, or intrastate commerce.

99 Id. at 754-55 (citations omitted). Although the Court refers in its secondpoint only to the imported goods handled by the stevedoring firms, the tax ontheir services in handling exports did not undermine this goal because it did notdivert any funds to which the federal government is entitled; the Constitution forbids federal taxation of exports. See id. at 759.



ed a test derived from a 1977 Commerce Clause case, CompleteAuto Transit, Inc. v. Brady.lOo That case tested state taxesagainst what the Washington Stevedoring Court termed theCommerce Clause's "four safeguards" of interstate harmony-"the prohibition of discrimination and the requirements ofapportionment, nexus, and reasonable relationship between taxand benefits."l01 This process of constitutional homogenizationresulted a year later in a judicial merger of Michelin Tire's firsttest of constitutionality under the Import-Export Clause, withthe test applied under the foreign commerce component of thedormant Commerce Clause doctrine. In Japan Line, Ltd. v.County ofLos Angeles, the Court held that the controlling standard under both provisions is whether the state tax preventsthe United States from "speaking with one voice" in conductingits commercial relations with foreign governments. 102

This evidently leaves Michelin Tire's second test of constitutionality-diversion of import revenues from the federal government-as the only unique contribution of the Import-ExportClause. The stevedoring companies argued that the three-partstandard of constitutionality promulgated by Michelin Tire didnot apply to them, in any event, because the merchandise loaded and unloaded by them was still "in transit," whereas theGeorgia tax upheld in Michelin Tire was on goods "no longer intransit."I03 But in Washington Stevedoring, the Court treatedthis distinction as irrelevant because the challenged Washington tax "[did] not fall on the goods themselves," and "theMichelin Tire policy analysis should not be discarded merelybecause the goods are in transit, at least where the taxationfalls upon a service [i.e., loading and unloading] distinct fromthe goods and their value."104 This distinction (enunciatedwithout explanation) seems to imply that Michelin Tire's "intransit" reservation applies only if the taxpayer is the owner of

100 See Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977).101 Association of Wash. Stevedoring Cos., 435 U.s. at 76l.102 Japan Line, Ltd., 441 U.S. at 434, 453-54.103 For this aspect of Michelin Tire, see supra note 48-54 and accompanying

text.104 Association of Wash. Stevedoring Cos., 435 U.S. at 757 (footnote omitted).



the goods, as in the Michelin Tire case, even though the Courtnotes that pre-Michelin Tire cases "had assumed that all taxeson imports and exports and on the importing and exportingprocess itself were banned by the [Import-Export] Clause."105

Once ·the Court ruled that state taxes were prohibited bythe Import-Export Clause only if levied on imports or exports"as such," it came close to depriving all three Michelin Tiretests of any operative significance because (1) taxes levied onimports or exports "as such" seem ipso facto to threaten eitherthe first and· third evils in the case of exports, or all three inthe case of imports;106 while (2) taxes that are not levied onimports "as such" do not qualify for immunity because they donot meet the threshold definitional requirement of the Clause,with the possible exception of taxes on imports or exports intransit.107 But if this reserved possibility is ultimately recognized by the Court, it would evidently have to rest on the curious and unexplained theory that a tax threatening one or moreof the evils described by Michelin Tire is prohibited by theImport-Export Clause even if it is not a tax on imports or exports "as such." This in turn suggests that the terminologyused in the Clause was even more ambiguous than the Courtacknowledged in Michelin Tire. 10S

Since Washington Stevedoring, the Supreme Court hasaddressed only one case alleging that a state tax violated theImport-Export Clause because it was levied on exports. In ItelContainers International Corp. v. Huddleston, the taxpayeralleged that Tennessee's general sales tax violated the ImportExport Clause, to the extent that it was imposed on incomefrom leasing cargo containers for exclusive use in internationalcommerce.109 Without commenting on the fact that the tax

108 [d. at 752 (emphasis added).108 See Hellerstein, supra note 30, at 115.107 For Michelin's reservation of this exception, see supra notes 55-63 and ac

companying text.108 Michelin Tire, 423 U.S. at 293.109 507 U.S. 60, 63 (1993). The taxpayer also attacked the tax as violating the

foreign commerce component of the Commerce Clause and the Supremacy Clause,the latter challenge being based on an alleged violation of federal regulations



was levied on an extremely broad spectrum of transactions (the"transfer of title or possession, or both, exchange, barter, leaseor rental, conditional, or otherwise, in any manner or by anymeans whatsoever of tangible personal property for a consideration"), so that it could hardly be described as imposed on imports or exports "as such,"llO the Court held that it did notthreaten to produce either the first or third of the three evilsidentified in Michelin Tire (interference with the nation's ability to speak "with one voice" in foreign commercial matters andthe disturbance of harmony among the states).111 The Courtthen turned to the tax's viability under the second MichelinTire test (diversion of import duties from the federal government). 112 This evil, the Court held, was not produced by theTennessee tax, because "it is not a tax on importation or imported goods, but a tax on a business transaction occurringwithin the taxing state," and hence it "does not divert importrevenue from the Federal Government."1l3

Finally, the Court rejected the argument that the tax violated "the prohibition on the direct taxation of imports andexports 'in transit.'" Hinting that this prohibition, which hadbeen applied in the Richfield Oil case,114 had been "altered"by the approach adopted in Michelin Tire, the Court held thatit did not apply to the case before it. The Court stated,"Tennessee's sales tax is levied on leases transferring tempo-

relating to containers, and of two international conventions to which the UnitedStates is a party. Itel Containers Int'l Corp., 507 U.S. at 63. Both claims were rejected. Id. at 69, 75.

lIO See id. at 69. In rejecting the taxpayer's claim that the tax was preemptedby two international conventions, however, the Court said explicitly that "[t)he taxis a sales tax of general application that does not discriminate against importedproducts either in its purpose or effect [and) its assessment bears no relation toimportation whatsoever." Id. This pronouncement by itself should have doomedthe taxpayer's Import-Export Clause claim.

11l Id. at 77-78. In holding that these two evils were not produced by the tax,the Court treated the Michelin Tire requirements as identical with the requirements of the foreign commerce component of the Commerce Clause. Seesupra notes 89-90 and accompanying text.

lI2 Id.113 Id. at 77.lie See supra note 62.



rary possession of containers to third parties in Tennessee; it isnot levied on the containers themselves or on the goods beingimported in those containers."115

In Louisiana Land & Exploration Co. v. Pilot Petroleum,the Fifth Circuit Court of Appeals squarely confronted thepossible application of the Import-Export Clause to prohibit anondiscriminatory tax if imposed on goods in transit, an issueon which the Michelin Tire Court reserved judgment.116 ThePilot Petroleum case involved a nondiscriminatory Alabamasales tax on the sale of jet fuel oil, which was delivered by theseller to a foreign oil tanker anchored in the port of Mobile,Alabama for export to Canada. 117 Relying both on a similar preMichelin Tire "in transit" decision and on the Michelin Tirereservation, the Court held that the Alabama tax "is an impostupon an export within the meaning of the Import-ExportClause, and is therefore unconstitutional."118

In reaching this conclusion, the Fifth Circuit noted that theAlabama tax was a "direct tax that is levied on the goods themselves," distinguishable from both the "indirect" tax upheld inMichelin Tire "on stored inventory which includes imported orexported products," and from the Washington Stevedoring tax"on a business or occupation which is related to the importationor exportation process."119 The Court, however, did not explicitly address the Michelin Tire comment that the Import-ExportClause "was fashioned to prevent the imposition of exactionswhich were no more than transit fees on the privilege of movingthrough a State. ,,120 It takes some stretching to attach this labelto the Alabama tax, which (1) was imposed on sales of jet fuel,

115 Itel Containers Int'l Corp., 507 U.S. at 77.us Louisiana Land & Exploration Co. v. Pilot Petroleum Corp., 900 F.2d 816

(5th Cir. 1990) (divided court), cert. denied, sub nom. Department of Revenue v.Pilot Petroleum Corp., 498 U.S. 897 (1990). The tax was imposed on "every distributor, refiner, retail dealer, [and others] of gasoline or any substitute . . . soldfor use as a fuel to propel aircraft." Louisiana Land & Exploration, 900 F.2d at817 n.1.

117 Id. at 817.us Id. at 821.119 Id.120 Michelin Tire, 423 U.S. at 290 (emphasis added).



whether for use in Alabama or for shipment to other states orforeign countries; and (2) would not apply if the seller retainedownership of the exported fuel until it arrived at its foreigndestination. A dissenting judge offered a cogent defense of theAlabama tax, though his pioneering rationale has not yetcaught hold:

The majority is surely correct that most oil exports areby tanker and that only coastal states can tax this form ofcommerce; by the same token it is only coastal states thatbear the regulatory, administrative and, increasingly, environmental costs of this commerce. The Framers did not intendsuch states to bear all these costs, and this nondiscriminatorytax imposed at the Mobile, Alabama port on fuel, which happened to be exported, is not unconstitutional.121

It is doubtful that this invocation of the intent of the Foundersis rooted in history; but if the Import-Export Clause is sufficiently ambulatory to take account of today's realities, theargument is persuasive.

The "in transit" issue was examined at length by the Supreme Court of Texas in Virginia Indonesia Co. v. Harris County, involving the validity of a county ad valorem personal property tax on goods purchased by a Delaware agent for an Indonesian joint venture ("VICO").122 Under the sales contract, thevendors shipped the goods to an independent Houston exportpacker for inspection and, assuming conformity to the contractspecifications, the goods were then packed and shipped abroadby the next available vessel. The export packer held the goodsfor no more than forty-five days, but the period could be as longas 175 days if the goods were damaged or defective or if approval for import into Indonesia was delayed; some goods remained in the Houston facility throughout the year.

Calling attention to the distinction in Washington Stevedoring between a "direct tax on goods and a tax on the busi-

121 Louisiana Land & Exploration, 900 F.2d at 822-23 (Jolly, C.J., dissenting).122 Virginia Indonesia Co. v. Harris County, 910 S.W.2d 905 (Tex. 1995). The

case was cited with approval by the Supreme Court in United States v. IBMCorp., 517 U.S. 843, 862 (1996).



ness of handling goods," and to Michelin Tire's reservation ofjudgment with respect to direct state taxes on imports andexports in transit, the Texas court observed that Michelin Tire"appears to preserve bright-line immunity for goods in thestream of export.,,123 Moreover, the Texas court announcedthat since the "Supreme Court has not overruled Coe u. Errollor any of its progeny, we apply the long-standing rule that atax on goods in the export stream of commerce violates the Import-Export Clause.,,124 The Texas court then examined thereasons for holding the goods in Houston en route from thevendors to Indonesia, concluding that the goods remained intransit under the long-established pre-Michelin principle thatthe continuity of transit is not interrupted by stoppages "due tothe necessities of the journey or for the purpose of safety andconvenience in the courts of the movement," as distinguishedfrom transit-breaking delays for such purposes as further processing or the receipt of orders. 125

Rather than stopping at this point, however, the Texascourt ruled that the tax imposed on VICO's goods violated the"one voice" policy set out in Michelin Tire by interfering withthe United States' commercial relations with Indonesia, whichmight "turn to other countries for its imported goods, or mightengage in retaliatory taxation of its own exports destined forthe United States."126 The Court rejected the taxpayer'sarguments that (1) the in-transit status of the goods is a"threshold" issue, and (2) if the goods were still in transit despite the delay in Houston, "it is unnecessary to analyze whether the tax impinges upon the Michelin Tire policies."127 Two

123 Virginia Indonesia, 910 S.W.2d at 911. The "stream of export" standardwas, for exports, the counterpart of the now defunct original package rule promulgated for imports.

12. Id. at 912.125 For a discussion of the "interruption/continuity" of journey cases, see Dia

mond Shamrock Reflning & Mktg. Co. v. Nueces County Appraisal Dist., 876S.W.2d 298, 302 (Tex. 1994) (holding oil imported into state from foreign country,reaching its ultimate destination in-state, may be taxed despite fact it is still "intransit" within taxing state).

126 Virginia Indonesia, 910 S.W.2d at 915.127 Id. at 910.



justices dissented in Virginia Indonesia, asserting that:

[T]he United States Supreme Court has abandoned theexclusive use of the in-transit rule and related condensationsof constitutional principles like "original package" and "exportstream" as accurate or adequate substitutes for the principlesthemselves. The fundamental difference in Import-ExportClause jurisprudence since Michelin Tire ... is that the constitutional provision's limit on state taxation is now defined inevery instance by the actual policies which support the limitsrequired by Michelin Tire's predecessor cases, to which thedoctrine of stare decisis requires obedience.128

VII. THE IMPORT-ExpORT CLAUSE AND STATEINSPECTION DUTIES

A. Inspection Charges

The Import-Export Clause's prohibition of state impostsand duties on imports and exports exempts charges that are"absolutely necessary for executing [the state's] inspectionlaws." In Gibbons v. Ogden, Chief Justice Marshall observed:

The object of inspection laws is to improve the quality ofarticles produced by the labour of the country; to fit them forexportation; or, it may be, for domestic use. They act upon thesubject before it becomes an article of foreign commerce, or ofcommerce among the states, and prepare it for that purpose.They form a portion of that immense mass of legislationwhich embraces everything within the territory of a state andnot surrendered to the general government; all which can be·most advantageously exercised by the states themselves. l29

In Marshall's day, state inspection laws embraced everything from pork to barrels, gunpowder to firewater, and lumberto fish; they regulated every aspect of these and other commod-

128 Id. at 915-16 (Hecht & Owen, JJ., dissenting).129 Gibbons v. Ogden, 22 U.S. (9 Wheat.) I, 203 (1824). See also the references

to state inspection laws in Chancellor Kent's opinion in Livingston v. Van Ingen,9 Johns. 507 (N.Y. Sup. Ct. 1812).



ities, including the "quality of the article, fonn, capacity, dimensions, weight or package, mode of putting up, and markingand branding of various kinds."130 In the words of an earlyPennsylvania statute, "It is the duty and interest of all governments to prevent fraud, and promote the interests of just anduseful commerce."131 Evidently, the purpose was often less toprotect local consumers than to establish and maintain thestate's reputation for supplying products of high quality tomarkets in other states and abroad. 132

Commenting in McCulloch v. Maryland on the scope of theNecessary and Proper Clause of the Constitution, Chief JusticeMarshall pointed out that "necessary," in the affairs of theworld, "frequently imports no more than that one thing is convenient, or useful, or essential to another"; but that by addingthe word "absolutely" in phrasing the Import-Export Clause,the Framers intended to change "materially" the meaning ofthe naked word "necessary."133 Given this view of the solemnity of the phrase "absolutely necessary," as well as the ubiquity

130 See, e.g., the laws cited by counsel for the respondent in Gibbons, 22 U.S.(9 Wheat.) at 115-125; for the matters covered by inspection laws, see Turner v.Maryland, 107 U.S. 38 (1883) (holding that inspection fee charge "appears to be acharge for services properly rendered," not in violation of Import-Export Clause,or wrongful state interference with interstate commerce). For an extended list ofcommodities subject to inspection in 1883, see Turner, 107 U.S. at 55-58, notes(a)-(c).

131 1 Dallas Pennsylvania Laws 883. See generally Loms HARTZ, ECONOMICPOLICY AND DEMOCRATIC THOUGHT: PENNSYLVANIA, 1776-1860, at 204ff (1948).

132 See Neilson v. Garza, 17 F. Cas. 1302, 1303 (C.C.E.D. Tex. 1876) (No.10,091) (Bradley, C.J.) (stating "no doubt the primary and most usual object of inspection is to prepare goods for exportation to preserve the credit of our exportsin foreign markets").

State laws still evince a strong interest in the protection of the reputation oftheir products, though the method of protection differs somewhat. Recently, manystates have enacted so-called "food disparagement" statutes that create "a cause ofaction for damages from disparaging statements or dissemination of false information about the safety of the consumption of food products." David J. Bederman,Food Libel: Litigating Scientific Uncertainty in a Constitutional Twilight Zone, 10DEPAUL Bus. L.J. 191, 196 (1998) (citing examples of such statutes from thirtyone states that either passed or are considering food libel laws). Invoked most famously (and unsuccessfully) against talk show host Oprah Winfrey, the constitutionality of these statutes is hotly debated.

133 McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316, 414-15 (1819).



of the early state codes for enforcing inspection laws, there is asurprising paucity of litigation by aggrieved importers andexporters. l34 This may reflect a fear that if success in courtproduced a lower fee, there would be an offsetting reduction inthe state's staff of inspectors, resulting in costly delays in meeting commercial schedules.

In one of the few Import-Export Clause cases assertingthat a state's inspection charges were excessive, JusticeBradley, sitting on circuit, expressed doubts about how such anallegation could be tried, observing that submitting it to a jury"might give rise to great diversity of judgment, the result ofwhich would be to make the law constitutional on one day, andin one case, and unconstitutional another day, in anothercase."135 Quoting the final clause of the Import-ExportClause-"all such laws shall be subject to the revision andcontrol of [C]ongress"-he then ruled that the allegedlyexcessive charge "must stand until [C]ongress shall see fit to alterit."136

These remarks were quoted with approval in a later Supreme Court decision upholding a North Carolina fee for inspecting imported agricultural fertilizer, but the Court saidthat "we cannot conclude that the charge is so seriously inexcess of what is necessary for the objects designed to be effected as to justify the imputation of bad faith ...."137 The Courtalso observed that if "the receipts are found to average largelymore than enough to pay the expenses, the presumption wouldbe that the legislature would moderate the charge."138 (Of

134 In a few cases, states have defended a challenged fee on the theory that itwas not regulation interfering with interstate commerce, which would be a violation of the Commerce Clause, but an inspection law. See, e.g., Hale v. BimcoTrading, 306 U.S. 375 (1939) (treating excessive "inspection" fee on out-of-stategoods as unconstitutional tax on interstate commerce); Bowman v. Chicago &N.W. Ry. Co., 125 U.S. 465, 488 (1888) (same); see also Department of Revenue v.James B. Beam Distilling Co., 377 U.S. 341 (1964) (holding tax on intoxicantsinvalid).

135 Neilson, 17 F. Cas. at 1303.138 [d.13'7 Patapsco Guano Co. v. North Carolina, 171 U.S. 345, 354 (1898).138 Patapsco Guano, 171 U.S. at 354.



course, a correction that was prospective only would not necessarily inure to the benefit of the complaining taxpayer.) Another Supreme Court case, challenging the amount charged byNorth Carolina for inspecting imported kerosene and otherilluminating oils, stated that if the charge was excessive, theCourt would indulge

the presumption ... that in the orderly conduct of the publicbusiness of the State the necessary correction will be made tocause the act to conform to the authority possessed [by thestate], which is to impose a fee solely to recompense the Statefor the expenses properly incurred in enforcing the authorizedinspection.139

The Court refused to discuss what relief would·be granted ifthe state failed in this duty of correction, noting that the suitwas commenced immediately after the law was passed, too soonfor the accumulation of experience on the relationship of thecharge to the state's expenses. Whether by intent or inadvertence, however, it did not quote or refer to the counsel of despair in the two earlier cases-that Congress was the ultimatearbiter of whether the charge was excessive.

Still another case held out more hope for the enforcementof the Import-Export's "absolutely necessary" criterion, withoutan inquiry-obviously distasteful to the federal judiciary-intothe hearts and minds of the state legislators, even though thecase arose under the interstate commerce aspect of the Commerce Clause, rather than under the Import-Export Clauseitself. In Cleveland Refining Co. v. Phipps & Phipps, a threejudge district court invalidated an Ohio fee for inspecting outof-state petroleum products on a showing that the fee exceededthe state's expenses by about sixty-three percent and that thisexcess was increased over time; the court ruled that the feeinterfered unjustifiably with interstate commerce. l40 The state

139 Red 'C' Oil Mfg. Co. v. Board of Agric., 222 U.S. 380, 393-94 (1912).14. 277 F. 463 (S.D. Ohio 1921), affd 261 U.S. 449 (1923). A three-judge dis

trict court convened because the case involved the constitutionality of a statestatute.



sought to salvage its law by arguing that the aggregate amountcollected, which covered both interstate and intrastate shipments, should be allocated between the two categories, andthat this would show that the interstate shipments were inspected at a loss to the state. The court rejected this proposalto bifurcate the charges, on the ground that the state law"makes no such separation of cost, nor does it afford any meansfor so doing."141 (The Court did not comment on whether thisrefusal would be appropriate if a taxpayer offered to show thatthe state was inspecting domestic· products at a loss and recouping the deficiency by overcharging out-of-state shippers.)The state appealed to the Supreme Court, which affirmed,stating that the district court had ruled against the state onthe facts and that "[i]t is enough to say that we approve" of thedistrict court's reasoning. 142

Finally, if an inspection fee is found to exceed the amountthat is "absolutely necessary" to enforce the state's program,the excess might well be characterized as a forbidden impost orduty on imports or exports. So viewed, it seems to qualify forthe federal-inurement feature of the Import-Export Clause.This means that the taxpayers who sought refunds in the casessummarized were the wrong claimants, since the amountshould have been disgorged to the Treasury of the UnitedStates.

B. Congressional Consent

The Import-Export Clause begins with a blanket authorization to Congress to consent to an otherwise forbidden impost orduty on imports or exports, somewhat similar to the judgemade right of Congress to consent to an otherwise prohibitedstate violation of the dormant Commerce Clause. In exercisingits Import-Export consent power, Congress can evidently pickand choose among the states and, within any particular state,among one impost or duty and another. To be sure, the Consti-

141 Phipps, 277 F. at 468.142 Phipps, 261 U.S. at 452.



tution provides that "all Duties, Imposts and Excises shall beuniform throughout the States,"143 but this constraint appliesonly to federal exactions, and it seems unlikely that a stateimpost or duty would become a tax imposed and collected byCongress by virtue of a Congressional consent that brushesaside the prohibition imposed on state taxes by the ImportExport Clause. Moreover, the consent presumably negatesapplication of the federal-inurement provision of the ImportExport Clause; otherwise, the consent procedure, as a practicalmatter, would become a dead letter. l44 In any event, doubtsabout this conclusion could be dispelled by including a releaseof any federal claim to the resulting state revenue in the consent itself.

At the end of the Import-Export Clause, there is a puzzlingsecond reference to the powers of Congress to "revis[e] andcontroul" "all such laws." If "all such laws" refers only to thestate's inspection laws, the power seems never to have beenexercised; if, on the other hand, the reference is to state taxinglaws, the power seems to add nothing to the consent procedureset out at the beginning of the Clause.

VIII. CONCLUSION

Though the Import-Export Clause's framing and initialinterpretation by the Supreme Court seemed to portend animportant role for the future, the Clause has become handmaiden to the Commerce Clause-not the other way around, asearly events may have suggested. Restricted to the field offoreign commerce in the late nineteenth century by the Supreme Court, the Court then further eased the Clause's limitations on states' taxing powers in the second half of the twentieth century. The 1976 Michelin Tire decision replaced themechanistic original package doctrine, long criticized for itsoverly generous tax immunity for foreign commerce, with a

143 u.s. CONST., art. I, § 8, cl. 1.'44 The amount inuring to the federal government is the "net produce" of the

imposts and duties, so that the state presumably can at least reimburse itself forits inspection costs and other expenses of collection.



more purposeful approach. While the Court's doctrinal replacement for the original package doctrine has been easier to articulate than to apply, there is no mistaking the general trendtowards the allowance of state taxes that are not intended todiscriminate against foreign commerce, that do not impose onforeign commerce more than its "fair share" of the state's taxburden, and that do not tax foreign commerce merely becauseof its origins.

Should Congress deem it necessary or expedient to allowstates to impose the sorts of taxes otherwise forbidden by theImport-Export Clause, Congress has the power to remove theprohibition. In addition, states may impose, without congressional consent, imposts and duties "absolutely necessary" for theexecution of their inspection laws, though they must hold thenet proceeds from those impositions for the benefit of the United States Treasury. Moreover, according to the Clause, Congress seems to retain the right to revise and control any suchinspection laws, though the scope and limitations of such powerare undefined, largely because Congress has not exercised it.

the import-export clause - yale university

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